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Imports rise by 103 percent in 4MFY22, increasing the trade imbalance

ISLAMABAD: The trade imbalance increased by more than 103 percent in the first four months of the current fiscal year (4MFY22), owing mostly to an almost double increase in imports compared to exports, according to the Ministry of Commerce (MoC).

The merchandise trade imbalance increased to $15.525 billion in July-October 2021, up from $7.617 billion in the same period previous year.

The new year began with a rising import bill, which offers a major threat of putting external pressure on the economy. Increased remittances, increased export revenues, and Roshan Digital Accounts, according to the Ministry of Finance, will assist to alleviate the burden to a significant extent.

Also read: In the first quarter of 2021, Pakistan had a 669 percent rise in vehicle imports

The upward trend in the trade deficit continued in the fourth month, with the merchandise trade deficit reaching $3.775 billion in October, up from $1.803 billion the previous month. According to preliminary calculations, growing import bills might push the current account above $10 billion in FY22.

In FY18, the trade imbalance hit an all-time high of $37.7 billion dollars. Government actions, on the other hand, resulted in a decrease to $31.8 billion in FY19 and $23.183 billion in FY20. In FY21, the trend reversed, with a trade deficit of $30.796 billion dollars.

Since December of last year, the trade deficit has been expanding, owing mostly to exponential increase in imports and very moderate development in exports. The fourth straight month of negative growth was attributed to exponential expansion in imports.

The import bill in July-October 2021 rose by 64.5pc to $24.994bn against $15.193bn over the corresponding months of last year. In October 2021, the import bill edged up to $6.247bn from $3.907bn over the last year, reflecting an increase of 60pc.

According to the MoC, about 40pc of the increase in imports was investment-driven – capital goods, raw material and intermediates – which indicated expansion and enhanced activity in industry.

The remaining 60pc of imports comprise petroleum, coal & gas at 34pc, vaccines 11pc, food 8pc, consumer goods 2pc and all others 5pc. Most of this increase is inelastic in nature, the ministry further claimed.

Also read: Government imports the “most costly” sugar in the country’s history

In absolute terms, the net increase in total imports over this period is $9.801 billion. Of this, consumer goods are $239m, food $823m, capital goods $1.620bn, raw material and intermediates $2.209bn, petroleum, coal & gas $3.364bn, vaccines $1.068bn and all others $478m.

One of the major initiatives of the government to encourage imports of raw materials also pushed up the import bill. Oil prices have also increased substantially, which pushed up the import bill because of high demand for energy in the domestic market.

In the outgoing fiscal year (FY21), the import bill surged by 25.8pc to $56.091bn from $44.574bn the previous year.

Exports posted a growth year-on-year of 25pc to $9.468bn in July-October 2021 against $7.576bn over the corresponding months of last year. In October 2021, exports posted a growth of 17.5pc to $2.471bn against $2.104bn over the last year.

“This is the highest ever export in any October in our history,” Adviser on Commerce Razak Dawood said.

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